Airlines to Be Asked to Pay Billions to Detect Bombs in Luggage

Aug 4, 2005
Source: Airline Business Report via NewsEdge Corporation

The chairman of the House aviation subcommittee, Rep. John Mica (R-Fla.), will try to convince the airline industry in the next few weeks to pay an additional $6 billion in aviation security fees over three years in order to raise money to install baggage-screening technology at airports. If he prevails, it would be close to a congressional act of wizardry. The airline industry scored a major victory in recent weeks by convincing Congress to systematically dismantle a White House proposal to hike aviation security fees. But Mica has some arrows in his quiver the White House did not possess.

The chairman's goal is to raise the aviation security fees this year, most likely as an amendment to a bill authorizing money for the Department of Homeland Security (DHS). In an interview with Airline Business Report, Mica said he would like to increase the aviation security fees to raise money for "in- line" installation of explosive detection system (EDS) equipment. This means the equipment would be integrated into an airport's baggage handling process. So far, the airline industry has expressed little interest in working with Mica. "Their initial response was negative, but some [airlines] say we should look at it," he said. "I am trying to find the way to finance the deployment as soon as possible." Airlines have raised fares seven times between February and June and therefore could absorb higher fees, according to Mica. One possibility is for the government to take the money out of general revenues or the Airport Improvement Program, but that would be hard to do, he said.

That being the case, Mica will put pressure on airlines to support legislation raising the fees for three years. As an incentive, he is willing to work out a compromise whereby his proposed fee increase to pay for in-line EDS equipment would be balanced by repealing another fee known as the air carrier security fee, according to Gary Burns, Mica's legislative director. This would be the carrot in the classic carrot-and-stick approach. Mica also may use the stick, such as reopening congressional debate on a so-called passenger bill of rights. In the late 1990s, airlines said they would improve customer service when Congress threatened to pass a passenger bill of rights. Mica could hold the airline executives' feet to the fire by delving into the degree of passenger improvements since then.

Officials at the Air Transport Association, the group representing commercial airlines, could not be reached for comment.

Mica probably would need to get congressional approval for the increased aviation security fees. Congress gave the Transportation Security Administration (TSA) the ability to unilaterally impose regulations, but it appears the Office of Management & Budget would prefer that any proposed fee increase go through Congress, Burns said in an interview with Airline Business Report. A bill has been approved by the House to authorize funding for DHS, and Mica might be able to attach an amendment to that measure when it goes into conference with the Senate.

Mica's three-year aviation security fee increase would generate about $6 billion, according to Burns. This is substantially higher than what those appropriating money in the House and Senate have in mind. The White House also requested substantially less funding for in-line installation of EDS equipment. The Bush administration requested $250 million in its budget request for fiscal year 2006. Both the Senate and House increased that figure when they approved their DHS appropriations bills. The Senate bill, approved July 14, provides $264 million, and the House bill, approved May 17, provides $325 million. The two bills must be reconciled in conference, but even if the higher House figure prevails, the funding for in-line installation would come up short.

Congress is "still nickel and diming it to death," Burns said. "At the end of the day, only a fraction of the airports would have the in-line equipment." In Congress, there is a mentality to "close the barn door after the horses get out," he added, referring to the likelihood lawmakers would quickly raise the additional money if a bomb hidden in luggage brings down a commercial aircraft. Congress rushed to put federal screeners in airports instead of spending money to employ new technology to scan both baggage and passengers for plastic explosives, Burns said.

Without in-line installation, EDS machines would continue to be parked in airport lobbies and subject to more human error, Burns and airport officials say. When it comes to both security and costs, the most effective system is to have private screeners with federal oversight and fully integrated in-line EDS machines, Burns said. The Government Accountability Office has found that in- line EDS systems have the best security detection rates and can reduce personnel costs by 78 percent.

Under current law, the aviation security fee is $2.50 for each leg of a flight, with a maximum of $5 one way. The White House wants to increase the fee to $5.50 per leg, with a maximum of $8 one way. The administration does not specify how the additional money should be spent and proposes no expiration date. The White House proposal has virtually no chance of becoming law this year (ABR, July 4). Mica would like to raise the fee to $5 per leg, with a maximum of $10 one way. Before Mica introduces legislation to do this for three years, he would like to gain the support of the airline industry. "When you have everyone talking on the same sheet of music, it is much easier to get past the House and Senate," Burns said.

The airline industry is being put in an interesting position. Airlines have been doing everything in their power to ward off new taxes and fees, stressing that the additional charges cannot be passed along to passengers because of severe competition from low-cost carriers. On the other hand, airlines want to prevent another terrorist attack that would have huge financial ramifications.

EDS equipment was put in crowded airport ticketing lobbies soon after the 9/11 terrorist attacks, but that was supposed to be a temporary solution. In addition to creating security concerns, the continued operation of the equipment in airport lobbies is labor intensive and forces the federal government to devote scarce resources to personnel, according to the American Association of Airport Executives and Airports Council International.

The two airport groups have formed the Airport Legislative Alliance to assess the impact of congressional actions. Todd Hauptli, senior vice president of the alliance, is very concerned about the low level of funding for in-line installation of EDS equipment. Even if Congress approves the House appropriations bill calling for $75 million more than the White House proposal, only a couple more airports across the country would get the in-line installation, he said in an interview with Airline Business Report.

TSA already has issued letters of intent to move EDS equipment in-line at nine airports. If the federal government insists on installing the equipment "at the pace of government rather than the pace of industry," the nation will wind up with only about 15-20 of the in-line systems at airports, according to Hauptli. That includes the nine airports that received letters of intent. There is a certain irony because the in-line installation would pay for itself in a short period of time through reduced costs, he said. But installing the technology requires an upfront expenditure of capital, and that is the problem.

For the nine airports that received the letters of intent, TSA estimates the in-line installation will save the federal government $1.3 billion over seven years and that the government would recover its initial investment at those airports in just over a year. Hauptli acknowledged that not every commercial airport needs an in-line system to screen baggage. "But the majority of 100 top airports need them," he said. While he believes that existing EDS technology performs the best at this time, new technology under development could be put in ticket counter areas at small and medium-sized airports. But he emphasized that in-line EDS technology is the most effective.

One way to raise money is for airports to issue bonds, but Hauptli does not believe all the airports that would benefit from in-line installation would do that. He decried the current state of affairs, "where rational sense is overtaken by arcane Washington budget rules." He also said the federal government treats airports like regulated parties rather than partners.

Airports contend the administration has asked for too much for certain programs and that the funds could be better spent on in-line EDS installation. They question the need for $280 million for TSA administrative and support personnel at airports. Instead, Congress could place a cap on the number of management and administrative workers to save money. Airports also question the administration's request for $142 million for regulatory compliance inspectors and other enforcement staff.

If Mica cannot bring the airlines into his corner, legislation to raise security fees for three years could be unpopular in Congress. For example, Sen. Ted Stevens (R-Alaska), the co-chairman of the Senate Commerce Committee, believes airlines are paying too many taxes and fees as it is. He is one of many lawmakers in the House and Senate who opposed the White House attempt to raise aviation security fees this year.

Security fees "should come down," Stevens told Airline Business Report. He would like to make existing funding levels stretch farther, and this would include getting everyday citizens to be an active part of security, much like during World War II. "There should be more volunteerism for the security concepts," he said. "Airline passengers should not pay totally for the burden because the terrorists used airplanes to commit that act in our country."